Amazon's Success Strategies

This assignment analyzes Amazon's successful business strategies. It delves into their operational efficiency, supply chain management, customer relationship marketing tactics, and how these elements contribute to their dominance in the e-commerce market. The analysis highlights Amazon's ability to overcome challenges and establish itself as a leading global retail giant.

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Operation Strategies
Amazon

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Operation strategies opted by Amazon
1) Introduction
In the late 2012, the company reported its first quarterly loss over the period of five years. The
company has invested heavily in new distribution centres, launching daily deals on the site and
the development of kindle. The founder Jeff Bezos knew that competition is very tough for the
company and there are many other players in the market who are performing well enough. In
1994 after seeing the boom in the internet usage of near about 2300% Jeff Bezos left his highly
paid job and started an online book store inside his rented house in Suburban Seattle (Teles and
Coutinho, 2011). His online book selling company emerged as the world’s largest online retailer
who deals in books, fashion, DVDs, apparels, furniture, electronics and health, and beauty.
Amazon deals with four types of customers, which includes sellers, enterprises, final consumers
and content creators. Amazon has designed its website consumer friendly by offering various
options in size, color, brand, and price. The website is very easy to use and has been developed
keeping in mind to cater the maximum needs of the consumer at one virtual portal. The
Company’s mission statement is “Earth’s most customer centric company” (Teles and Coutinho,
2011)
2) Amazon’s Operations strategies
 Goods and services design- organizational output design is covered in this strategic
decision area of operational management. This is done primarily with the help of
technologies. For example, the company ensures that its online retail services are in line
with the requirements of target customers using the advanced communication and

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information technologies. It also supports the maximum operation of e-commerce (Teles
and Coutinho, 2011).
 Quality management- the objective of this decision is to maximize the operational
output in order to fulfill the customer satisfaction. For example, amazon always motivates
its employees to solve the problems and improve the business by creating new ideas
(Teles and Coutinho, 2011).
 Location strategy- the accessibility of market and resources is considered in this
strategic decision like their warehouses should be nearest to the location where the
maximum customer base is available.
 Process and capacity design- the objective of this decision is to optimize the capacity
and production process. Extensive automation is applied to streamline the business
process. For example, the company’s main output is to receive the orders so it has
automated the technologies to receive as many orders as possible. This approach
highlights the importance of automation and other related technologies to enhance the
capacity and process (Cassidy and Scott, 2002).
 Strategy and layout design- this decision area deals with the movement of information,
material, and human resource. This objective is fulfilled with the help of efficient layout
designs which is aligned with computer assisted programs. For example, in the
warehouses, all the items are assigned as per the computerization policies. The layout is
made for maximizing the shelf space and minimizing the aisles for achieving the optimal
capacity and this is done without reducing the process efficiency.
 Supply chain management- this strategic decision is concerned with the streamline of
supply chain management. Company does this through automating and enabling the

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buyers and suppliers to access some of its IT assets for example sellers streamline their
supply with help of demand data available on the company’s online retail website, and
buyers can track the order placed and can do all the communication with sellers through
the data available on the website.
 Job design and human resource- HRD is the main focus of this strategic decision area.
Company’s operation management uses a combination of third party employment
agencies and in house employees. For example, workers from all these agencies fill the
temporary positions of the company and are also evaluated if they are fir for the
permanent position or not? Especially in their warehouses and fulfillment centers.
Company’s recruitment process is based on the organizational growth.
 Scheduling- operation managers keep in mind the short term and intermediate schedules
to ensure that all the resources satisfy market needs. In this strategic decision area
company is fully reliable on suppliers to run its online retail business. For instance,
suppliers need to access the company’s website in order to determine the demand level
and streamline their delivery and shipping schedules accordingly.
 Inventory management- .under this decision company has to ensure the sufficient
storage of inventory to meet the demand, this is done with the help of using just in time
technique for example in most of the cases as the inventory comes in the warehouse it
immegiatelybgets delivered to the customer to fulfill the order(Emblemsvåg, 2006).
Moreover, to ensure the optimal inventory holding and order, employees in the
warehouse are trained to maximize the speed so that orders can be fulfilled. By this way,
company minimizes its cost by satisfying the maximum customer’s need.

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 Maintenance- it emphasizes on the stability and reliability of the business processes.
Workers are trained regularly in order to maintain HR capacity for satisfying the
company’s need for its e-commerce business. Moreover, companies always search for
advanced options for the improvisation of its operational efficiencies (Emblemsvåg,
2006).
3) The do-buy decision strategy
It is the departure point for creating operations strategy.it helps managers to decide what should
be done by organization and what should be done by suppliers (Cassidy and Scott, 2002).
Amazon has clearly defined the objectives for its managers that what startegies must be adopted
by them in order to increase the sales of the company and suppliers are also aware of the terms
and conditions on which they need to work. The company decided to outsource its products
through various suppliers in order to cater the maximum market with minimum cost.
3.1) Relationship strategy by Amazon
Amazon has placed itself as a giant in the world of technology by providing the convenience at
customer’s doorstep (Shelar, 2016). Since inception amazon has acquired many strategic gains in
research and technology and claims to be world’s most customer centric company by
implementing many innovative ideas such as one click order convenience to customers,
improvising on customer reviews etc v.it has also acquired new customer base by forging an
international relationship with the help of viral marketing.

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3.1.1) Ways in which amazon excels relationship building.
When it comes to big companies most of them fail to acquire customer relationship, but this is
not the case with amazon. The company not only builds customer relationship but also provide
them with the personalized services by offering them the products basis their past purchasing
history (Shelar, 2016). Below are the strategies which make the company standalone amongst its
competitors:
 Data-driven relationship marketing- amazon leverages the idea of web research and
big data to all their customer facing interactions. Whenever a customer calls a customer
representative they not only great you with your name but they have all the required
information available to them in order to make you feel comfortable and confident. The
same can be seen in their extremely personalized emails in which they not only refer to
you with your name but also gives you the required information without wasting much of
your time (Shelar, 2016). The maximum a customer visits their sites and search for
products the more personalized emails you get from them.
 Convenience and experience- customers now days prefer to shop online because of the
convenience they get. Amazon provides them with the technologies ease with which they
can look for what they want without taking much time and also make them confident by
their replacement or return protocols. Operation managers keep in mind the short term
and intermediate schedules to ensure that all the resources satisfy market needs. In this
strategic decision area company is fully reliable on suppliers to run its online retail
business (Shelar, 2016). For instance, suppliers need to access The___14 Company’s
website in order to determine the demand level and streamline their delivery and shipping
schedules accordingly. Customer’s shopping is made more hassle free by

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 Doing quick purchases with the help of one click.
 Amazon’s dash buttons- it is a hardware which can be bought at home and
all the purchases can be done just by one click.
 Amazon prime in which customers can get their orders in a day and if the
location is nearby then maybe the same day.
 Making e- commerce an experience to share- although it has been observed that
shopping is a social experience this is not in the case of e-commerce here customers
make their purchases alone. But amazon relationship marketing team has built up an
option in which whenever a customer makes any purchase then they are being asked to
share their experience on social networking sites (Shen, Benyounes and Gerbaud, 2015).
This not only works as a tool for advertising but also helps in the improvisation of the
product.
3.2) Cost strategy
Amazon is having overall cost leadership among all of its competitors by providing
 Lowest possible prices
 Launching amazon prime in which customers can save shipping cost
 Customers can avoid state tax.
 Providing various free shipping offers.
 Dealing with small companies and resellers.
 Deficit selling of kindle.
 Price check app launched by amazon (Shen, Benyounes and Gerbaud, 2015).

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https://www.cloudave.com/51883/amazon-wins-innovate-core-innovate-transform/
Fig 1.1
As per many research, it has been observed that amazon changed prices of about 80
million products in a single day because they wanted to provide their customers with the
best possible prices in the market (Cieśla, 2015). For example in the mid of year 2012 HP
8600 printer was launched other sites were offering a price of 160$ wherein amazon sold
it for 120$ as the market opened many sellers raised prices up to 180$ but amazon raised
it only to 130$ and at the end of the day amazon was the cheap priced seller in the market
and its sales figures raised drastically (Cieśla, 2015).

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https://www.forbes.com/sites/walterloeb/2014/11/20/amazons-pricing-strategy-makes-
life-miserable-for-the-competition/#480a56cb5c60
Fig 1.2
3.3) Supply chain management by Amazon
From the beginning of its establishment amazon has focused on its logistics of
distribution as a center to the online retail growth. Initially, the company uses to hand deliver its
products but now everything is being managed by the supply chain managers and they are now
managing around 400 orders per second during peak times and bringing their revenue to around
90bn$ a year (Cieśla, 2015).. All this is done by working at various levels:
 Pre structural level- amazon is one of the giant of selling books and other stuff
online
 Unit structural level- their supply chain management has an edge over many
other competitors because of the shopping experience they offer to their
customers. It has a strong network of the supply chain (Cieśla, 2015).
 Multi structural level- amazon is the first company to launch the rating system
under which customers have the options to rate its shopping experience and
company can work accordingly. Amazon ships its products on its own (Cieśla,
2015)..
 Relational level- amazon has such a vast network of the supply chain that its
competitors uses company’s website to improvise their business.

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As the company is growing it gradually increasing its ware houses and other networks to meet
the demand of the customers they are focusing on setting up the warehouses near the target
customer areas so that the response time is decreased (Cieśla, 2015). Company targets to deliver
their maximum items the same day they are ordered so that their competitors do not peel off their
customers.
This strategic decision is concerned with the streamline of supply chain management. Company
does this through automating and enabling the buyers and suppliers to access some of its IT
assets for example sellers streamline their supply with help of demand data available on the
company’s online retail website, and buyers can track the order placed and can do all the
communication with sellers through the data available on the website (Cieśla, 2015).
3.4) Supply chain drivers
 Facilities-
 Order fulfillment and warehousing for third party sellers.
 49 fulfillment centers all over world
 Transportation
 Own logistic network
 Relying on national parcel couriers like fedX, ups.
4) Smart innovation strategy

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The main reason behind the success story of amazon so far is their innovation strategy,
the company started with the selling of DVD and CD along with the books. In the same
year company introduced auction scheme this strategy provided a better experience for
the customer and protected them from the frauds done by bidders though this innovation
does not bring any profit to the customer by doing this, they came into customer’s
knowledge (Tadelis, 2002). Amazon adopted B2C model but later it again changed its
strategy and shifted from direct business sales model to service and sales model, with this
model company’s target group changed to customers and another business group.it offers
many small business groups to use company’s web services and platforms to offer
various products to the customers, but amazon was charging some percentage of
commission from every sale (Tadelis, 2002). With this service, amazon created an eco-
system in the market and launched amazon associate program under which it developed a
partnership with customers and business associates. The primary goal of this program
was to increase the customer base. Gradually with the addition to more and more
products in the portfolio, the customer increased and it again changed its business model
(Ritter and Andersen, 2014).There was a time when company’s stock price were on high
and this is not any flake, company has actually performed well during this time by mixing
their innovation strategies. The company has worked on its core objectives.
4.1) Segmenting innovation efforts

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https://www.cloudave.com/51883/amazon-wins-innovate-core-innovate-transform/
Fig 1.4
Here familiarity is used as the basis of segmenting as it manifests itself in two ways:
 Institutional advantage- companies are well aware of what they need to do and what
they are doing, service and product features with weaknesses and strength is well
understood, what customers want and how it will be provided is also understood (Ritter
and Andersen, 2014)
 Personal advantage- expertising in the current position is what every organization
dream of. How you deal with the current scenario by taking new initiatives is how you
are judged in today’s world (Ritter and Andersen, 2014).

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Moving out of this familiarity is not easy and this is where the growth of the company is
found.so it needs a lot of efforts moving outside of the world exploring new opportunities
and work accordingly by taking new initiatives (Chua, 2011). Many organizations are not
willing to do such things and this is where they are lacking behind.
4.2) Amazon innovations by type
One of the best things about the working of amazon is that that it consider innovation to be
the major factor for its core operations.

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https://www.cloudave.com/51883/amazon-wins-innovate-core-innovate-transform/
Fig 1.5
Sustain
If any company thinks that sustaining innovation doesn’t work then amazon is the best example
for them.
 Collaborative filtering option is the one wherein a customer’s search a product and some
suggested products are displayed for example whenever a customer search any product
then some other products also comes under tagline “people who brought that also brought
this” (Chua, 2011). At some point in the history, this search engine was alone
contributing 35% of revenue growth.
 Single click checkout- it is the innovation which was brought in by amazon. With a single
click, a customer can complete its order and this is the significant improvement in the
field of online retail stores (Chua, 2011).
 Drone delivery- it is a futuristic idea, delivering orders within 30 minutes and do not have
face any hassle of traffic if this idea works then the company will for sure be the best
among all(Spector, 2006).
 Prime- it is a way in which customer pay shipping for all orders at once, earlier they had
to pay to ship for every single order but with prime company charge for one time and
customers are free from paying to ship.

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4.3) Expand
It means expansion of new customers vs. new products and services but here the
familiarity measure is less but meaningful.
 Kindle- it is amazon’s reading tablet, customers who are having kindle can easily access
e books and download annotate passeges.kindle is contributing to 10% revenue of total
sales.
 Affiliate marketing- it is now a very normal practice but amazon was the company who
innovated this idea, though with this company was able to acquire new customers with
existing offers (Jovićević and Ivanović, 2014).
 Amazon fresh- it is a service of home delivery for groceries wherein all the perishable
groceries are delivered to customers and along with new offers are also introduced.
Transform
Amazon’s growth is increasing because the company is investing in transformative innovations
along with its core objectives. The risk factor is much here because the company is moving
beyond the familiarity and deals with its new competitors. The company offers cloud computing
services to other companies with the help of amazon web services (Rossman, 2017).
Amazon sets an example for other companies on how to deal with innovation portfolios. As per
research it has been found that sustaining innovation is the key factor for growth and it is not
easy for companies to do but amazon is the company among them who are doing this for ages
and will continue to do so and this is the reason why they are growing their numbers and
becoming a giant in the world of online retail (Jovićević and Ivanović, 2014). Amazon always

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believes in taking risks and keeps on revising its portfolios according to the market requirements
for example company’s web service was a success but its fire phone was a failure, the company
learned from this and completely changed its product portfolio.
What matters is the right mix and it will vary as per the company’s core objectives. The key to
understanding all this is that why you are investing in innovations (Rossman, 2017)
Conclusion
Amazon is one of the best company among online retailers, it has planned various strategies in
order to increase its sales, initially the company was only dealing with the books and opened
many retails book shops and gradually they started offering many products like fashion,
accessories, electronics. Amazon deals with four types of customers which includes sellers,
enterprises, final consumers and content creators, so the company decided that Instead of
delivering the products on its own company chose to outsource the products. Many sellers are
connected with the company who are responsible for timely delivery of the products, warehouses
have been opened at those places where the company have maximum customer coverage so that
products can be delivered within the same day or maximum by next day. Company’s supply
chain network is very strong as soon the order is received it is ensured that it reaches on time and
safely. All these strategies are helping company to build strong customer relation and are able to
compete with its competitors. Company has formed a strong relationship marketing team who
has built up an option in which whenever a customer makes any purchase then they are being
asked to share their experience on social networking site.. This not only works as a tool for
advertising but also helps in the improvisation of the product with the help of feedbacks they get
from customers. Amazon as a company has faced many challenges and successfully dealt with
them and finally managed to emerged as an online retail business giant.

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